From gap to chasm: Alberta's increasing income inequality

In 1990 Alberta had the same Gini index as Canada (0.317/0.318) and Saskatchewan at 0.341 was the highest, meaning it was the province with the greatest inequality of income. By 2011 all jurisdictions except Saskatchewan had seen increased levels of inequality. Alberta, at 0.370, had the highest Gini index in the country, and considerably higher than Canada as a whole, at 0.344.

Alberta also had the greatest change between 1990 and 2011, with a 0.052 increase compared to Canada’s increase of 0.027.

In other words, Alberta’s income distribution had become significantly less equal compared to the other provinces and to Canada as a whole over this period, and by 2011 incomes in Alberta were the most unequal of any province in the country.

The effect of taxation is illustrated in Chart 2, where the same columns are shown, now using after-tax incomes.4 If personal income taxes (PIT) were perfectly proportional then the income distribution would not be changed from the distribution seen in Chart 1 by introducing taxes. Other public policies of redistribution through transfers of cash or income in kind can still change the net distribution to greater equality; however, progressive tax systems inherently increase equality by taxing a greater proportion of income from higher income earners.

Chart 2: Gini Indexes for Canada and Canadian Provinces (After Tax)

Chart 2 shows the Gini index numbers for after-tax income for Canada and each province. The Gini index for after-tax income again shows a general movement away from equality between 1990 and 2011 for all jurisdictions except Saskatchewan. This is a major issue in itself that is beyond the scope of this fact sheet. The after-tax Gini coefficient for Alberta in 1990 was somewhat higher than for Canada—0.283 compared to 0.278. Canada as a whole and each province except Saskatchewan had become less equal by 2011. Once again, the rise in inequality in Alberta by 2011 was the greatest by far compared to all other provinces, rising by 0.045 (to 0.328), an increase almost twice as much as the national increase of 0.024 (to 0.302).

In other words, when compared to the rest of Canada, Alberta has the greatest inequality of income and the province’s single-rate personal tax structure (commonly called a “flat tax”) means Alberta has the smallest improvement in levels of income equality through taxation.